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Post by bengilbert on Sept 5, 2016 21:26:06 GMT
Would they both be listed at the same time? I ask because, without further detail, I'm not sure which option I would go for. However, a simultaneous listing would provide a very quick indication of which tranche is the more popular and thus increase its secondary market potential. One tranche could sell very quickly, the other may hardly move and you could be left holding a big pot. Yes, they would be listed at the same time. There may turn out to be a difference in demand for the different tranches. This would be useful for us to know, so that we can better pitch it in future deals. Although it would be ideal for investors as a whole to be equally happy with the two tranches, we're not too concerned about being left holding some of the investment, since both tranches will be priced at levels that we or our other investors are happy to hold.
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Post by bengilbert on Sept 5, 2016 21:32:16 GMT
Basically I like the idea (but I think pricing might be interesting.....). Two questions:- 1. What would you do if demand is skewed heavily one way or the other? 2. It's quite short term, leave aside mrc's comments about it presumably being weather proofed and so actually close to completion what happens if something blows up out of nowhere and causes say a two month delay (eg ~40% of the originally expected loan term)? Here I'm thinking more about project risk than financial risk. Would you apply penalty rates? Would they be the same, or differ by tranche? 1. Hold on to whichever tranche doesn't sell, or find other investors for it, and take the difference in demand into account for future loans where we look to do something similar. 2. Good question. Usually, if a borrower is in default, lenders would receive 1.5% per month whilst the loan is in default. We'll think about whether this needs to be amended so the different tranches are paid different default rates. We would, however, do our very best not to get into this situation, by building some contingencies into the loan term and keeping close track of progress.
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ablender
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Post by ablender on Sept 6, 2016 9:31:24 GMT
. . . . LTV around 66% against the current valuation, . . . . . . LTV on tranche A might be 44% with tranche B making up the balance to 66%, . . . Hi bengilbert, Am I understanding this correctly that the 44%-66% split will add up to the 66% LTV? (i.e. parts of the 66%LTV)
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Post by bengilbert on Sept 6, 2016 9:58:43 GMT
. . . . LTV around 66% against the current valuation, . . . . . . LTV on tranche A might be 44% with tranche B making up the balance to 66%, . . . Hi bengilbert, Am I understanding this correctly that the 44%-66% split will add up to the 66% LTV? (i.e. parts of the 66%LTV) As an example, if the security was worth £100,000, tranche A would be for £44,000 and tranche B for £22,000.
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ablender
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Post by ablender on Sept 6, 2016 11:11:48 GMT
Hi bengilbert , Am I understanding this correctly that the 44%-66% split will add up to the 66% LTV? (i.e. parts of the 66%LTV) As an example, if the security was worth £100,000, tranche A would be for £44,000 and tranche B for £22,000. Thanks. Clearer now. (Though probably, following your OP, tranche A £22k (44%), tranche B £44k (66%).)
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ali
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Post by ali on Sept 6, 2016 11:15:48 GMT
As an example, if the security was worth £100,000, tranche A would be for £44,000 and tranche B for £22,000. Thanks. Clearer now. (Though probably, following your OP, tranche A £22k (44%), tranche B £44k (66%).) No, that would make tranche A 22% (22k/100k).
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ablender
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Post by ablender on Sept 6, 2016 15:07:50 GMT
Thanks. Clearer now. (Though probably, following your OP, tranche A £22k (44%), tranche B £44k (66%).) No, that would make tranche A 22% (22k/100k). As I read it £22k is 44% of £66k which is 66% of £100k. Edit. That is not adding up. what am I doing? These are thirds.
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SteveT
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Post by SteveT on Sept 6, 2016 15:12:16 GMT
Edit. That is not adding up. what am I doing? It's just as bengilbert explained. If the security was worth £100,000, tranche A would be for £44,000 (so 44% LTV) and tranche B for £22,000 (66% LTV, including the prior £44k first charge)
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ablender
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Post by ablender on Sept 6, 2016 15:18:34 GMT
Finally got it. And my colour is not light. (don't want to use other words in case someone gets offended.) Goes to show that everyone can be dumb sometimes. Edit: I know why I misunderstood it. I read it as A = 44% and B = 66% instead of "making up the balance to 66%".
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Post by wickedxuk on Sept 6, 2016 15:20:56 GMT
I'm missing something obvious here. Why is the risk different between the two parts? Surely it's the same risk if they are secured against the same security? Just because they are different loan amounts I'm struggling to see why they are classed as higher and lower risk to each other.
It's been a long day. Brain not working. Clearly just missing the obvious!
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ablender
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Post by ablender on Sept 6, 2016 15:23:26 GMT
I'm missing something obvious here. Why is the risk different between the two parts? Surely it's the same risk if they are secured against the same security? Just because they are different loan amounts I'm struggling to see why they are classed as higher and lower risk to each other. It's been a long day. Brain not working. Clearly just missing the obvious! In case of losses, Tranche A is paid first with losses left for Tranche B.
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SteveT
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Post by SteveT on Sept 6, 2016 15:31:02 GMT
Yup, holders of tranche A would be repaid in full (capital plus interest) before holders of tranche B received a penny. Put another way, holders of tranche B would be wiped out before holders of tranche A started losing any money.
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woodie
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Post by woodie on Sept 6, 2016 15:31:27 GMT
Yes, and to my mind Tranche A will be as near as to a gold plated guarantee that you will get with p2p.
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ali
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Post by ali on Sept 6, 2016 15:33:53 GMT
Yes, and to my mind Tranche A will be as near as to a gold plated guarantee that you will get with p2p. How do you work that out? It doesn't make any difference to tranche A that tranche B exists (or doesn't exist). It's a low risk loan, yes. But that's just a factor of the LTV.
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SteveT
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Post by SteveT on Sept 6, 2016 15:35:52 GMT
Suspect the point was that there aren't many 6 month P2P loans on near-complete residential developments offering 10% for 44% LTV
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